alm report strategic planning in law firms

7/29/2019 ALM Report Strategic Planning in Law Firms

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Thinking Like Your Client:

Strategic Planning in Law Firms

Written by:

ALMlegalintel.com

888-770-5647

[email protected]

OctOber

2012


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A report from ALM Legal Intelligence

ThinkingLike YourCLienT: LawFirm STraTegiC PLanning ALM Legal Intelligence 2


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DISCLAIMER

2012 ALM Legal Intelligence. All rights reserved. All inormation in this report is verifed to the best o the authors and thepublishers ability. However, neither LexisNexis nor ALM Legal Intelligence accepts responsibility or any loss arising rom relianceon it. Neither this publication nor any part o it may be reproduced, stored in a retrieval system, or transmitted in any orm orby any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior permission o LexisNexis or ALMLegal Intelligence.

PREFACE

Thinking Like Your Client: Law Firm Strategic Planning is an

ALM Legal Intelligence white paper sponsored by LexisNexis.

ALM Legal Intelligence gathered data, conducted interviews, and

administered the online survey. Cathy Lazere wrote the report

and Jennier Tonti conducted the survey and was the report

editor. We would like to thank all those who participated in the

survey and agreed to be interviewed or this report.

October 2012


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TABLE OF CONTENTS

Introduction ..................................................................................................................................6

Key Findings ..................................................................................................................................6

About the Survey .........................................................................................................................8

Drawing Up the Plan: Setting Priorities ..................................................................................9

Getting the Right Input rom Stakeholders ......................................................................... 10

Finding the Right Team: Hiring Laterals and Getting Rid o Nonperormers ................11

Pricing, Productivity, and Proftability ...................................................................................13

Monitoring Client Relations: CRM and Cross-Selling ......................................................... 14

The Future: Empowering Strategic Planning and Planners ............................................. 16

Case Study: Dechert LLP.....................................................................................................17

Case Study: Stinson Morrison Hecker LLP .................................................................... 18

Appendix: Survey Responses .................................................................................................. 19


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FOREWORD

LExISNExIS IS ALAYS PLEASE T PARTNER IT ALM MEIA N

surveys like this. Every time we engage in the simple process of asking questionsandpaying attention to the answers you providewe learn more about customers, theirneeds, the pressures they are facing and how to serve them better. Those insights are vital

to our business.

So, what did we learn from the latest market engagement? Certainly, youll read through thereport and see for yourself, but heres our quick assessment of the results. The level of commitmentleading law rms are showing to strategic planning is moving in the right direction, but the rate ofsubstantive progress is still frustratingly slow. There is genuine cause for concern.

LexisNexis has spent the past few years highlighting the difference between the practice oflaw and the business of law; and the lackluster economic conditions over that same timespan haveonly served to reinforce how important those differences are. Without a doubt, law rms have athorough and detailed understanding of the practice part; thats their forte. Its the business of lawpart where shortfalls occur.

Revenue is the top priority in most strategic plans. Yet, almost half of the respondentsare remiss in building, tracking and measuring client loyalty and satisfaction. Are rmsoverlooking the direct link between revenue and satised customers?

Protability is the second strategic plan priority. But, fewer than half are actively focusedon a non-billable hour strategy, and more than half cant yet tell if AFAs are more protablethan hourly rates. AFAs and various pricing models have been around for a few years; theyare not going away. Isnt it time to honestly reexamine the elements that make your rmprotable?

Talent acquisition/retention holds the third top spot for strategic priorities, although lateralsdominate the discussions and, apparently, everyones plans. How sustainable are growthmodels tied to an on-going musical chairs game of lateral talent shifting from rm to rm?Is anyone focused on a plan for organic growth?

Admittedly, the legal community is facing big issues ones that are not easily solved. But thesame big issues seem to surface every year, with every survey. In too many ways, the slow pace ofchange is inhibiting growth and limiting progress. Where are the bold initiatives? Which rmswill break away from the pack and say enough waiting; were going to take action and make some

changes of our own? Fortunately, those rms are starting to surface. Youll see some of their goodideas proled at the end of this survey report. You can use their examples and the insights gainedfrom this survey to plan your own proactive steps and make a difference at your rm.

Rutger Van der WallVice President & Managing Director CRM & Analytics

LexisNexis


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Key Findings

INTRODUCTION

CRPRATINS INvEST SINIFICANT TIME AN ENERY N STRATEIC

plans. They hire armies of analysts and consultants to develop their mid- to long-termstrategies, benchmark their company against the competition, and check budgets againstactuals to ensure the strategy is working and ROI is achieved. Law rms, on the other

hand, devote much less effort to strategic planning as compared with their corporate clients.

Historically, they have paid lip service to planning rituals, and tend to be more reactive thanproactive in the way they conduct their business.

Lately, however, rms are beginning to apply more rigor and discipline to the task of measuringand managing the performance of the rm, perhaps as a response to the Great Recession.Lawyers and legal professionals are being forced to become more active business managers andto go beyond simply servicing clients. There is a need to not only understand the clients legalneeds but to also understand their businesses and industries at a deeper level. Firms are drawingupon marketing, business development, market insights that come from business intelligenceand metrics, and CRM tools to retain and grow business with existing clients more effectivelywhile also attracting new ones. Theyre paying more attention to practice group and individualperformances. In short, they are beginning to run the rm like a businessnot as a collection ofbillable legal experts.

1FIRMS ARE bEINNIN T IMPLEMENT LN-TERM

STRATEIC PLANNIN, bT INTERATE ExECTIN

F TSE PLANS IS STILL N TE RIzN. According

to the survey, the top three priorities are: growing a frms

revenue, improving frm proftability, and talent acquisition/

retention. One in eight frms said they have strategic plans in

place to address the frms priorities, but implementation is not

as rigorous as it could be, with many frms lacking the tools

and metrics to accurately assess proftability. For many frms,

integrating strategy with business development and improving

stafng and productivity represent opportunities or improvement

and ocus in uture planning cycles. Case studies in this report will

speak to frms who have applied some exactitude in measuring

their strategic planning and ROI.

2METRICS FR MEASRIN FIRM PERFRMANCE

AvE YET T bE FLLY ALINE T STRATEY.

When listing the top three measurements or gauging

frm perormance, respondents cited frm revenue (52%);

frm proft (44%); and proft per partner (37%). Respondents also

reported they used markers or utilization (30%) and turn their

attention to operating margins (24%) to measure perormance.

However, to truly ascertain i frms are on the right course and

how well they will do going orward, frms need to look beyond the

usual metrics. They should consider more predictive measures o

productivity or individual engagements and practice groups as

well as understand the impact o their pricing agreements with

clients. They should also try to measure the progress o their new

business development and cross-selling endeavors against ROI.


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3FIRMS REPRT ITTIN KEY MEASREMENTS,

SC AS PRFITAbILITY, AT TE FIRM LEvELbT

NT AT TE INIvIAL CLIENT AN PARTNER

LEvEL. Eighty percent o respondents report that

client retention goals are being met. They also report that frm

proftability (70%) and revenue growth targets (59%) are being

achieved. But when asked about client and partner proftability,

the percentage o respondents dropped precipitously to 44

percent and 46 percent, respectively. Key stakeholders inthe frm are not making ull use o business inormation and

metrics. Survey respondents report that business inormation is

being disseminated through presentations (86%), hard copy or

electronic spreadsheets (79%), and portals such as SharePoint

(54%). And while all respondents report that managing partners

are using the metrics, use o these key business indicators whittles

down through the ranks: 85 percent o respondents reported

usage by the COO or executive director; 76 percent said that

practice group leaders actively use the metrics. Numbers drop

urther or the CMO (49%) and equity partners (46%). To ensure

strategy is executed, all key stakeholders should be involved and

inormed on the strategy as well as measured against the goals o

the strategy to drive business transormation.

4NERSTANIN A CLIENTS bSINESS

AN INSTRY IS ESSENTIAL T A FIRMS

IFFERENTIATIN FRM ITS CMPETITRS.

When asked about their competitive advantage, frms

mentioned value and quality o service ollowed by knowledge

o clients business/client relationship and client ocus/customer

service. Given this, it is surprising that just over hal (56%) report

that their frm has a plan in place to build, track, and measure

client loyalty and satisaction. Furthermore, when asked i the frmleaders understood the business model o their top 20 clients, only

22 percent said they were extremely knowledgeable o all acets o

the business. Clearly there is room or improvement.

5TE bIEST CALLENES FACIN FIRMS IN 2012

ILL CNTINE IN TE FRESEEAbLE FTRE.

Generating new clients, fnding competitive advantage

in a stagnant market, acquiring laterals and integrating

them into the frm, increasing productivity, managing AFAs to

make them proftablerespondents said their frms are contending

with a multitude o challenges in 2012. And the uture looks like

more o the same, with the exception that frms are becoming

more dedicated to the use o corporate tools supporting activitiessuch as a strategic planning and enhanced project management.

Firms are trying to balance organic (business development,

cross-selling) with inorganic growthand it is not yet clear that

these strategies can ully succeed with limited management and

reporting accountability.


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About te Surey

This report, conducted by ALM Legal Intelligence, provides an overview

o the law frm business model, how law frm leaders respond to business

challenges, and the current state o law frm strategic planning and how

that landscape is perceived to be changing. The data were collected viaemail invitations to a Web-based survey conducted between July 18, 2012,

and August 14, 2012.

Invitations were sent to managing partners, executive directors, lead

marketers, law frm administrators, and COOs at Am Law 200size law

frms. Quantitative results rom 79 respondents were supplemented by

interviews with a crosssection o the group. Respondents came rom frms

o all sizes: 48 percent rom frms with 100250 attorneys, 23 percent rom

frms with 251500 attorneys, and 30 percent rom frms with more than

500 attorneys.

To complement the statistical measurements and survey responses covered

in this study, a couple o narrative examples were added to the mix profling

two successul Am Law 200 frms. Insights gained rom their stories can

serve as best practice examples showcasing how to turn strategies and

plans into tangible actions. In reaching the implementation and executional

phases o their plans, both frms are demonstrating considerable success at

the practice o law as well as the business o law.


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DRAWIN Up ThE pLAN: SETTIN pRIORITIES

EN ASKE AbT TE FIRMS TP TREE bSINESS STRATEY

priorities, respondents cited growth in revenue, getting a handle on talent, andincreasing protability. The majority report that they have strategic plans in placeto address these priorities, but when pressed, many of our follow-up interviews

revealed that implementation is

not as rigorous as it could be. Partof the problem is that rms do notconsistently dene measurementsand milestones through which toassess progress. As a result, actualsuccess rates in executing plansvary widely. To further complicatethe situation, linking strategyto actionable plans in businessdevelopment, efciency, productivity,and stafng is complicated, requiringknowledgeable resources as well asactionable information and tools.

In the past, rms focused toomuch on aggregate protability;now under a trying economy theyre realizing that some practices are more protable orvulnerable than others. Their response is often to simply go after the business that will be morelikely to yield prots and put fewer resources (such as new associates or marketing spend) insome of the lessprotable areas.

That approach doesnt always yield the desired results. There are often divergent levels ofgrowth, productivity, and protability across practice areas. One respondent mentioned that thebiggest challenge facing his rm was keeping the oars of the major revenue generators in the waterrowing in the same direction given a wide variety of protability among business generators.

The perception is overwhelmingly that partners drive planning, even when there is ampleinput from sources such as COOs, marketers, or rm administrators who may have similar levelsof understanding about clients industries and needs. About 20 percent said consultants and othernonbillable staff are involved in the strategicplanning process. In follow-up interviews, respondentsconrmed that the process is still driven by managing partners and other C-levels in the rm. Theresult: a knowledge gap without enough input from nonattorney sources beyond the leadershipgroup, sources who might better understand clients industry and business needs.

Still, at the end of the day the legal world is uid, and the best laid plans are often scuttled.Partners can pick up their book of business and leave at any time, noted one interviewee. In orderto mitigate partner ight, some respondents noted that their rm is putting more effort towardemployee retention. Training is one piece of this, but rms are also trying to become more amenableto lifestyle and generational differences in their partners and associates. For example, youngerattorneys may have a greater focus on work/life balance, since they are more apt to spend time withtheir (young) families relative to their older colleagues.

Which o the ollowing are the top three (3) priorities or your frm, according to frm leaders?

Growing the firms revenue 66%

Talent acquisition and retention 59%

Improving firm profitability 54%

Client performance management and client satisfaction measurement 32%

Growth through cross-sell ing 29%

Improving billing and collections 15%

Managing succession plans 13%

Understanding client industry trends 10%

Growth through mergers or acquisitions 6%

Mitigating risk 5%

Improving realization rates 5%

Opening domestic offices 3%


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ETTIN ThE RIhT INpUT FROM STAkEhOLDERS

FIRMS ARE FACE IT TE CALLENE F CMIN P IT NT NLYindividual practice group strategies, but an overall rm strategy. As expected, 89 percentof respondents said partners gave signicant input to strategic plans. But not all arecommitted to the strategy after its been formulated. The owners of the strategy need to

be engaged, said W. Russell Welsh, chair and CEO of Polsinelli Shughart. Sometimes details get

lost. Plans are not driven down as deep as they should be, he added.Bo Yancey, director of consultants with LexisNexis Redwood Analytics agreed. Successful

strategy execution starts by understanding and interpreting business insights and then translatingthose insights into actionablemeasures that can be used tomanage a rms performance. Inour work with rms across thecountry, we see that when theexecutive leadership mandatesgoals, educates partners and rmleaders, and then measures success,change in practice becomesreality.

To help professionalizestrategic planning and drive execution, rms are turning to nonattorneys. Sixty-two percent ofrespondents cited the involvement of nonbillable rm leaders such as CMOs, and CFOs/COOs.When I rst got here, noted one CMO, there was not a lot of planning. Now we do a lot.We have seven full-time people in marketing. Were implementing new technology to createefciencies. Its now a thoughtful, step-by-step process. Were no longer shooting from the hip.

However, there is great variability as to how much attention is being paid to the expertise ofnonattorney senior staff. The acceptance of nonattorney input depends on the vision or forceof personality of a chair who can inuence the managing committee and partners to buy thesuggestions of the rms nancial and marketing experts or their consultant counterparts (21percent of rms surveyed are turning to outside consultants and other third parties for further helpdeveloping the strategic plan).

Successul strategy execution starts by understanding

and interpreting business insights and then translating

those insights into actionable measures that can be used

to manage a frms perormance. In our work with frms

across the country, we see that when the executive

leadership mandates goals, educates partners and frm

leaders, and then measures success, change in practice

becomes reality.

Bo Yancey, director of consultants with LexisNexis Redwood Analytics


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FINDIN ThE RIhT TEAM:

hIRIN LATERALS AND ETTIN RID OF NONpERFORMERS

EN AIN TEIR CMPETITIN, FIRMS LK AT LIKE FIRMS:

rms with a similar geographic presence (73%), rms with similar key areas of expertise(58%), and rms of a similar size (55%).

To compete in an increasingly tough legal market, 70 percent are making adjustments to

their leverage ratio of nonpartners to partners. They are also turning to lateral acquisitions, withthree-quarters expecting to hire more laterals over the next ve years. These acquisitions can have

an increasingly positiveeffect on rm protability;however, when asked tolook back over the lastve years, only 28 percentof respondents said theirlateral strategy was veryeffective. Given that mostrms cite lateral acquisitionas a key growth strategyand the success rate is only

marginally effective, thequestion begs: What willthe ultimate success be? Inaddition, if just about everyrm is using this strategyto increase protability,these rms will have troubledifferentiating themselveswhen everyone is dipping

into the same pool of talent.An emerging trend is the increased use of tools and data to supplement existing processes for

laterals, so that they are better able to hit the ground running. We have yet to see the longer-termimplications this has for the apprenticeship model so pervasive across the legal profession. At some

point down the road, there may not even be enough laterals to fuel growth.An inux of new blood is sometimes the answer; however, in recent years the importanceof summer associates and rstyear hires has fallen behind prerecession levels (only 15 percentof rms foresee hiring more of either group). Given the assessments offered above on theeffectiveness of lateral strategies, signicant room for improvement remains in terms of executingon these strategies. One way is to use tools and data to understand who are the best clients, so therm can actively seek new clients that match a similar prole, leveraging existing expertise to winnew relationships. Separately, rm leaders can continue to cross-sell lateral expertise to where thewhite space is in the client base.

What criteria do you evaluate when you compare yoursel to competitors?

Please indicate the three (3) most important.

Firms with a similar geographic presence 73%

Firms with similar key areas of expertise 58%

Firms of similar size (number of attorneys) 55%

Firms with similar levels of profitability, e.g. profits per partner 26%

Firms with similar Am Law or NLJ rankings 21%

Firms that have relationships with my client contacts 17%

Firms that have relationships with my firms target prospects 13%

Firms that generate similar revenue 13%

Specialist / boutique 6%

Firms with similar growth strategies 5%

Firms with similar strategic partnerships 1%

GC preference for use of inside vs. outside counsel 1%

Firms with similar hiring strategies 0%

Client preference for Legal Process Outsourcers (LPOs) or 0%

alternative legal providers

Other (please specify)*3%


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Not all partners are effective business-generators, however. Nine out of 10 rms report thattheir rm has unprotable partners, and 70 percent noted that errant partners are at risk ofdeequitization or being put on a performance plan. In challenging economic times the issue hasbubbled up to the surface. Partners who arent contributing to the rms protability are underincreased scrutiny, as these nonperformers can affect the rms overall health. When asked whatthe biggest challenge facing the rm was in 2012, one respondent mentioned [getting] therogue partner out of the rm and adjusting the proper level of attorneys for the level of work.Another respondent noted: There are too many partners without sufcient billable work. Ourattorneys need to become client development experts rather than expensecutting experts. Clearly,when it comes to partners, there is a gap between performance measurement and performancemanagement. This is something that may change over time, as professionals continue to transformthemselves into more active business managers.

Five years rom now, how do you think each o these stafng categories will have changed in size

(vis--vis FTE headcount)?

Will IncreaseWill Remain the

SameWill Decrease Responses

Lateral associate hires 74% 19% 6% 78

Lateral partner hires 72% 24% 4% 78

Contract attorneys 65% 32% 3% 78

Retention and development

o frm leaders63% 33% 4% 78

Non-Equity Partners 54% 28% 18% 76

Equity Partners 45% 31% 24% 78

Paralegals 37% 51% 12% 78

Outsourcing to LPOs 27% 57% 16% 70

Summer associates 15% 64% 21% 78

First year associate hires 15% 62% 23% 78


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pRICIN, pRODUCTIvIT, AND pROFITABILIT

LA FIRMS CNTINE T STRLE T REMAIN PRFITAbLE IN TE

wake of the economic downturn. We asked respondents to tell us how they had copedduring the last year and to divide their priorities into short and longterm xes. The topthree shortterm tactics were switching to less expensive vendors, reducing or eliminating

summer associate programs, and deequitizing partners. But as indicated earlier, the implementation

of the last tactic doesnt always occur. The top three longerterm tactics mentioned were cross-selling, investing in technology, and acquiring practice areas.

The most aggressivelypursued growth options for AmLawsize rms are businessdevelopment (84%), acquiringlaterals (76%), and partnerinvestments (71%). Regardingpricing strategies (such asalternative fee arrangements),only 45 percent are activelyfocused on a nonbillablehourstrategy right now, but rms are

closely monitoring pricing. TheCOO is tracking AFAs, saidone CMO. Theres a formulahe uses for guring out therealized hourly rate. We reallydont know for sure if AFAs areworking. Every RFP now asksfor it. They have a set budget forlitigation and want to nd a wayaround just a monthly bill. Tothat end, 56 percent echoed thatit is too soon to tell if AFAs are more protable than hourly rates.

Still, in the minds of clients at least, AFAs are here to stay1. It is unlikely that companies willwant to revert to the more casual and costly pricing of earlier days, so its incumbent upon rmsto continually measure the productivity of their engagements and client satisfaction. Even if theeconomy improves, rms will need to nd ways to deliver more cost predictability so they can bemore responsive to their clients and the rms nancial needs.

1 Reer to the ALM and LexisNexis CounselLink report Speaking Dierent Languages: Alternative Fee Arrangements or Law Firms and LegalDepartments or more details.

In which o the ollowing ways, i any, has your frm taken any steps in the past 12 months toward

managing proftability through cost-cutting or revenue growth as a response to the current economy?

Please tell us i each plan is part o a long term strategy, or a short term trend by dragging each

statement to its appropriate box.

Long Term Str ategy Shor t Te rm Trend

Cross-selling 65% 8%

Investing in technology 56% 8%

Acquiring practice areas 44% 8%

Switching to less expensive vendors 14% 18%

De-equitization o partners 13% 15%

Beneft reductions 5% 3%

Reducing or eliminating summer associate program 4% 16%

Cuts in IT spend or internal spend 3% 6%

Pension cuts 3% 1%

Cuts on ace-to-ace business development activities, such as

entertaining clients or gol outings3% 6%

Layos 1% 11%

Bonus cuts or reezes 1% 11%

Cuts on business development networking activities, such as attending

conerences or holding client seminars1% 8%

Salary cuts or reezes 0% 9%


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MONITORIN CLIENT RELATIONS:

CRM AND CROSS-SELLIN

EN IT CMES T CLIENT SATISFACTIN, LA FIRMS PAY A LT F LIPservice to the need for engagement, with little follow-up. Just over half (56%) ofrespondents reported they have a plan to track client loyalty and satisfaction, while 44percent admitted they didnt have any kind of systematic program or were unsure if a

program existed. For those rms who do have a program in place, there was wide variability aboutthe frequency of monitoring that program: 45 percent said they do this on an annual basis, but analmost equal amount (47%) noted they did it only episodically, on a casebycase basis or that suchmeasurements were rarely ongoing.

Too many rms are lackadaisical not only about systematic clientsatisfaction measurements,but also about targeting new clients. Although every rm said they could identify the rms top veclients, when asked about how knowledgeable rm leaders are about key business drivers for theirtop 20 clients, only 22 percent reported that they were extremely knowledgeable. Clearly there isroom for improvement in the client relationship management arena, for both existing and potentialclients, particularly when the majority of rms claim that knowledge of their clients businesses is asource of competitive advantage.

One ought to be able to name future clients, said a CMO. Just dont cast bread upon thewater or take a shotgun approach. If you want to be known to counsel of ve new corporations, just

communicate with those ve counsel. The more that a law rm concentrates on naming companiesand individuals, the more effective theyll be, he added.

Firms are at least aware that once they have a client, they have to work at keeping thatclient. The top three things that respondents thought their rm should change about clientrelationships wereincreasing the amountof work from keyclients (vs other rms),improving protability,and improvingclient relationshipmanagement.

But none of those

goals come to fruitionwithout a systematiccustomer relationshipmanagement (CRM)effort on behalf of therm. Attorneys have

Which aspects o your frms relationship with clients would you most like to change in 2012? Please

rank all that apply in order o importance, with 1= Most Important.

The amount of work we get from key clients versus with other firms 37%

Improve profitability 32%

Improve client relationship management 28%

Better focus on profitable clients v. high-cost clients 26%

Institute better / new project management practices 24%

Provide higher service levels 21%

Differentiate work from competitors work 16%

Institute client satisfaction surveys / interviews 9%

Improve trust in the client/firm relationship 4%


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come around to being customercentric, not justproviders of legal services. They need to think ofvalue-added services, said a CMO. His rm relies onpost-engagement assessments. If a problem is detected,the chair goes on a client call.

Our survey interviewees mentioned advertising,social media, and in-person customer contact as themost useful techniques in keeping in touch with clients. After a few years of hesitancy in this area,

some rms are now encouraging their attorneys or someone in marketing to blog periodically. Oneexample of proactive social media outreach would be a rm regularly sending out alerts on whatthey think might be relevant legislation to a clients business. Social media is not the panacea ofclient relations, however, and attention must be paid to accuracy and relevance. If the alerts are outof date or aimed at the wrong target, they could ultimately undermine a rms attempt to appearknowledgeable of a clients business or industry. However, use of social media in the absence of aclient acquisition and retention strategy managed with appropriate tools dilutes the power of socialmedia engagement. Individually managed and ad hoc communications can ultimately dilute therms message and presence in the market, and negatively impact business development efforts.

Some interviewees have concluded that old-fashioned client contact is still most important. Saidone CMO: In the legal eld, we need to restore real relationships. We need to look at the businessissues behind the legal issueswhats worrying counsel. We need to be a bedside doctor as opposedto a remote clinician.

In the legal feld, we need to restore real

relationships. We need to look at the business

issues behind the legal issueswhats

worrying counsel. We need to be a bedside

doctor as opposed to a remote clinician.


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ThE FUTURE:

EMpOWERIN STRATEIC pLANNIN AND pLANNERS

R RESEARC AS ESTAbLISE TAT MST FIRMS ARE N bAR

with strategic planning. But to ensure smooth sailing in the future, theyll need todetermine who will lead versus support these efforts. In a partnership structure, that canbe difcult.

I report to the COO, but 150 bosses are running the rm, said one CMO at a national lawrm. Firms will need to elevate department heads to make decisions. Empowerment comes fromthe top, but rms are slow getting there, he added.

If the chair is fully engaged in strategic planning and empowers the COO, the CMO, partners,and everyone else to get involved, operations run smoother. The goal is to dispel my own myopiaand take a longer view, said Andrew M. Smulian, chair and CEO of Akerman Sentertt. Thekey element is dealing with all of the constituencies. Clients who ask why they want to use us.Associates who ask why do they want to work with us. Why should partners want to invest with us?And what is our societal purpose? We need to integrate all this.

But having the chair and senior nonattorney staff involved is not enough. Some rms are evencontemplating creating the position of director of strategy with a standing committee to driveplanning over threetove year horizons. This position would also be charged with helping toensure that the strategy was updated as needs changed. And more and more rms will also consider

practice group administratorsnonattorneys, possibly MBAs, similar to nancial analysts inlaw rmswho could help with strategy implementation through monitoring performance andprotability measurements in each practice group.

But even if a rm doesnt change its existing infrastructure to include more planners, it will stillneed to plan. Ultimately, the success of the any rms strategic plan hinges on two key factors:rst, on the partners knowledge of the business principles, and second, on the partners ownershipand accountability in execution of the plan, said Bo Yancey, director of consultants at LexisNexis.When rm leaders are educated on business metrics, rm performance and the nancial health ofthe rm, we see transformation in overall nancial and business performance.


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With 26 ofces around the globe and more than800 lawyers, creating a strategic plan became a criticalimperative for Dechert LLPa necessary step taken toalign all the rms resources and focus them on the samegoals.

Decherts senior leadership reached that important

conclusion coming out of the economic difculties facedin 2008 and 2009, according to David Cybulski, Directorof Business Intelligence for the rm. The leadershipteam realized industry conditions were changing andwanted the rm to have its own strategic vision inresponse. Maybe its no more insightful than peoplelooking inward when difculties occur, but we knew weneeded to understand more about where we were going,how we were going to compete, and how big we couldbecome. We wanted to set our own course instead ofbeing pushed around by change; that was the impetusbehind a more disciplined approach.

The rm turned to an outside consultant for guidance

in crafting a ve-year strategic plan. Direction cameright from the top, with hands-on involvement from theCEO and chairman, and reached down to director-levelsthroughout the rm. Everything jumped into high gearafter the direction was set, said Cybulski. Elements ofthe strategic plan were distributed as appropriate, and thesenior managers began adding tactical plans, executionaldetails and nancial metrics that made it all very real andvery measurable.

Cybulski believes that technology and thecommitment to share information played a big partin what the rm has been able to accomplish. Withgoals and metrics rmly established, the systems and

applications also were in place so everyone, especiallytimekeepers, could easily track their productivityand progress. Monthly reports go out on a regularschedule, he said, but individuals can access up-do-date dashboards and information 24-hours-a-day, evenif theyre just tracking hours as their contribution. Of

course, practice leaders and managers can get a morecomprehensive look at bookings, billings, work inprogress, realization totals, and other key metrics tied tobusiness goals.

There are no silver bullets or quick xes involved inany of this, stated Cybulski. It has been and remains an

ongoing, evolutionary process that takes time; were stilltrying to nd our way and make adjustments on a regularbasis. He acknowledges how difcult it has been toshift attorney interests from the law toward sales-relatedactivities, business issues and delivering the numbers.Some of them make the transition right away; theyget it, and fundamentally know how to leverage clientrelationships, identify cross-sell opportunities and easilywin new business. For others, it takes a little more workand effort. We try and make it as easy as possible foreveryone because in the end we all have a role to play inthe sales process.

In many respects, what drives success at Dechert

is the unwavering commitment and consistency thatcontinues to come from the senior leadership team. Theplan, goals, metrics, and dashboards are socialized andregularly discussed across all levels of the rm; in turn,performance and measurement have become part of theeveryday culture.

Were almost following a textbook model,concluded Cybulski. Information creates knowledge,which gets translated into action, resulting in a bonus.Rewarding good behavior and performance withnancial incentives just starts the cycle all over again.I dont believe anyone wants to deviate from thatmodel. However, the model is one that is constantly

being reexamined and rened in this rapidly changingenvironment. Just because a plan of action has workedin the past does not guarantee that it will work in thefuture.

CASE STUD:Stic to te plan: Decert LLp


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The strategic focus for Stinson Morrison Heckergrow the client base and grow the work we do for clientsisprobably identical to hundreds of other law rms acrossthe country, except for a single word appended at the endof their sentence: protably.

Doug Doerer, Chief Financial Ofcer at Stinson,

explains how that one word sets the operating modelfor some 300 attorneys spread across the nation in eightofces. We are relentless in our focus on protability; Iadmit it. We dont make compromises, we dont do one-offs for special discounts, and we wont accept work just tokeep timekeepers busy. That approach has cost us clientsand work; but, it has also kept the rms productivity,growth rate, protability, and prots per partner allheading in the right direction, which is up.

Surprisingly enough, the catalyst for this approachcame a few years ago from the professional services teamof a primary software supplier; their encouragement wasto focus on the elements of protability instead of just

revenue. With buy-in from the CEO, COO and keypartners, the strategic direction was set.

Today, weve got the nancial tools and businessintelligence technology in place to keep us all on track,commented Doerer. Across the rm, our peopleknow what the benchmarks are and have become verycomfortable talking about pricing, rates, net margins,leverage, realization and similar topics. More importantly,theyve got enough knowledge to understand how thosesubjects interrelate and why theyre important.

Shifting the Stinson culture to a more disciplinedapproach has taken over two years of effort. It beganwith the practice group chairs and getting their buy-in,

and then rolled out across the rest of the rm. However,according to Doerer, one critical component that makesthe model work well has been a focus on the client.

Externally, that focus has resulted in a lot ofdiscussions and earnest attempts to understand thepressures clients face in their business and from their own

management. Clients want to negotiate, they want toget a good deal, and they want to be treated fairly, saidDoerer, but they dont want to deny protability. Theyunderstand the business model and how it works, oftenbetter than we do.

That means Stinson attorneys have to be a bit more

creative sometimes in meeting protability benchmarks;it also means saying no when the conditions arentright. Doerer believes that clients appreciate the honestyand transparency demonstrated when negotiations anddiscussions occur; overall, it builds a lot of trust.

Building trust internally also involves a lot of the sametechniques, according to Doerer, including keeping thefocus on the customer. When youre talking pricing andprotability and whether to take a deal or not, focusing onclients is critical, he said. It quickly removes overheadand other internal calculations from the discussions, andadds balance to deciding if a deal is good for both the rmand the client. Its tough to challenge the methodology,

process, or the intent.The element of trust also has placed Doerer and

his growing department in a central role at the Stinson.Currently, the group is tracking the performance onmore than 50 different fee arrangements as part oftheir ongoing processes. The systems at their disposalcontain a few hundred budgetary models that assemblethousands of nancial components involved in the pricingand billing of every client project. Our goal, offeredDoerer, is to be the trusted experts for our attorneysand manage all that nancial complexity for them. In fact,project management is part of the job description for allour billing specialists.

When Doerers team does their job well, which hasbeen the case so far, there are no surprises at the rm,there are no surprises for the clients, attorneys can pursuethe practice of law, and Stinson can be successful at thebusiness of law protably.

CASE STUD:proftability By te Numbers: Stinson Morrison hecer LLp


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AppENDIX: SURVEY RESPONSES

2. Does your frm currently have a strategic plan in place to address these frm priorities?

Yes

No

Not sure

80%

18%

3%

1. Which o the ollowing are the top three (3) priorities or your frm, according to frm leaders?

Growing the firms revenue 66%

Talent acquisition and retention 59%

Improving firm profitability 54%

Client performance management and client satisfaction measurement 32%

Growth through cross-selling 29%

Improving billing and collections 15%

Managing succession plans 13%

Understanding client industry trends 10%

Growth through mergers or acquisitions 6%

Mitigating risk 5%

Improving realization rates 5%

Opening domestic offices 3%


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3. Who is responsible (meaning, members o this group gives signifcant input) or developing the

strategic plan? (Check all that apply.)

Partners 89%

Non-Billable Firm Leaders 62%

3rd Party Organizations (e.g. Consultants) 21%

Non-Billable Staff 19%

Other (please specify)* 11%

*The top 3

Board o Directors

Senior Managment

Executive Committee

Managing Committee; COO

Board o Directors

4. Which resources or tools aid in the development o your strategic plan. Choose any that apply.

Financial analysis & reports (internal) 94%

Business intelligence 76%

Financial analysis & reports (e.g. benchmarking) from an third-party vendor 56%

Industry reports 56%

Management Consultants 48%

Client relationship management tool 23%

Financial advisors (external) 5%

Firm leadership 2%


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5. As part o your frms plan, which growth options, i any, is your law frm planning or pursuing in the next

two years? (Choose all that apply.)

Acquiring laterals 96%

Business development 94%

Pricing strategies, such as alternative fee arrangements 72%

Lawyer professional development 71%

Client relationship management 65%

Introducing new technology 58%

Project or knowledge management 54%

Acquiring practice groups 44%

Acquiring law firm/s 36%

Top line revenue growth to fund investments 36%

Making acquisitions 31%

Opening new U.S. office/s 29%

Considering merger offers 12%

Partnering with overseas firms 10%

Partner Investments (Retention of Earnings) 9%

Outsourcing functions / commodities 9%

Regional centralization of operations 8%

Opening new international office/s 6%

Extensions of lines of credit 4%

Outside investments 3%

Other 3%


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6. How aggressively is your frm planning on pursuing these options?

4:

Aggressively

Pursuing

3: Seriously

Considering

2: Exploring

the Possibility

1: On the

Radar, Haven't

Looked Deeply

Responses

Business development 84% 14% 3% 0% 73

Acquiring laterals 76% 19% 5% 0% 75

Partner Investments (Retention o

Earnings)71% 0% 29% 0% 7

Top line revenue growth to und

investments68% 32% 0% 0% 28

Client relationship management 67% 29% 4% 0% 49

Extensions o lines o credit 67% 33% 0% 0% 3

Partnering with overseas frms 63% 25% 13% 0% 8

Project or knowledge management 62% 31% 7% 0% 42

Lawyer proessional development 62% 35% 4% 0% 55

Opening new international ofce/s 60% 20% 20% 0% 5

Introducing new technology 51% 42% 7% 0% 45

Outside investments 50% 0% 50% 0% 2

Pricing strategies, such as alternative eearrangements

45% 54% 2% 0% 56

Acquiring practice groups 38% 44% 15% 3% 34

Making acquisitions 38% 46% 17% 0% 24

Opening new U.S. ofce/s 35% 35% 26% 4% 23

Acquiring law frm/s 30% 44% 22% 4% 27

Outsourcing unctions / commodities 29% 71% 0% 0% 7

Regional centralization o operations 17% 33% 33% 17% 6

Considering merger oers 0% 44% 44% 11% 9


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7. Which o the ollowing metrics are most important to your frm as you manage frm perormance?

(Choose three)

*Individual partner perormance measured broadly Attorney Productivity

Firm Revenue 52%

Firm Profit 44%

Profit per Partner 37%

Utilization 30%

Operating Margin 24%

Expenses 24%

Revenue per Partner 23%

Realization 20%

New Business Acquisition 10%

Profit by Practice Area 9%

Leverage 6%

Cross-Selling metrics 6%

Revenue by Practice Area 5%

Client Retention metrics 4%

Other (please specify) 4%


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8. Which o the ollowing metrics has the greatest impact on partner compensation decisions in your frm?

Choose All that Apply Choose Primary

Collections 78% 27%

Firm Proft 57% 18%

Billings 72% 13%

Client Business Development 71% 11%

Revenue per Partner 43% 10%

Utilization 52% 10%

Proft per Partner 39% 8%

Realization 77% 8%

Firm Revenue 53% 6%

Proft by Practice Area 29% 5%

New Business Acquisition 52% 5%

Leverage o book o business 47% 5%

Operating Margin 28% 4%

Revenue by Practice Area 19% 3%

Cross-Selling metrics 41% 3%Client Retention metrics 18% 1%

Expenses 25% 1%

Other 5% 5%

9. Who is/are the key stakeholder(s) using frm metrics? (Please check as many as apply.)

Managing Partner(s) 100%

COO, Executive Directors 85%

Practice Group Leaders 76%

CMO or Business Development leader 49%

Equity Partners 46%

Legal Administrators 14%

Non-Equity Partners 13%

CIO 6%

All Attorneys 4%


*CFO

Chie Practice Ofcers

Board and Compensation Committee

Executive Committee


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10. How does the frm share key business inormation with frm leaders? (Choose all that apply.)

*Monthly Financials

Quarterly Meetings o Firm Leaders

Presentations (Hard copy or electronic) 86%

Spreadsheets (Hard copy or electronic) 79%

Internal Firm Portals (e.g., SharePoint) 54%

Reporting Dashboards self-developed 45%

Reporting Dashboards Vendor developed 21%


11. Regarding the ollowing measures, has your frm been meeting its internal goals?

Yes No Not sure Responses

Client retention 80% 5% 15% 79

Firm proftability 70% 25% 5% 79

Firm revenue growth 59% 38% 3% 78

New client growth 53% 34% 13% 77

Partner proftability 46% 41% 13% 78

Client proftability 44% 38% 18% 77


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ALM Legal Intelligence 27

12. What criteria do you evaluate when you compare yoursel to competitors?

Please indicate the three (3) most important.

Firms with a similar geographic presence 73%

Firms with similar key areas of expertise 58%

Firms of similar size (number of attorneys) 55%

Firms with similar levels of profitability, e.g. profits per partner 26%

Firms with similar Am Law or NLJ rankings 21%

Firms that have relationships with my client contacts 17%

Firms that have relationships with my firms target prospects 13%

Firms that generate similar revenue 13%

Specialist / boutique 6%

Firms with similar growth strategies 5%

Firms with similar strategic partnerships 1%

GC preference for use of inside vs. outside counsel 1%

Firms with similar hiring strategies 0%

Client preference for Legal Process Outsourcers (LPOs) or 0%alternative legal providers

Other (please specify)*3%

*Firms with similar revenue per lawyer Firms that may have lower rates.

13. Regarding your current non-partner to partner leverage ratio, do you believe the frm is optimally

resourced to provide exceptional client service while also growing frm business?

Yes, staffing is fine as it is

No, we need to make adjustments

Not sure28%

70%

3%


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14. Five years rom now, how do you think each o these stafng categories will have changed in size

(vis--vis FTE headcount)?

Will IncreaseWill Remain the

SameWill Decrease Responses

Lateral associate hires 74% 19% 6% 78

Lateral partner hires 72% 24% 4% 78

Contract attorneys 65% 32% 3% 78

Retention and development

o frm leaders63% 33% 4% 78

Non-Equity Partners 54% 28% 18% 76

Equity Partners 45% 31% 24% 78

Paralegals 37% 51% 12% 78

Outsourcing to LPOs 27% 57% 16% 70

Summer associates 15% 64% 21% 78

First year associate hires 15% 62% 23% 78

15. As you evaluate your lateral strategy in the past fve years, how would you rate its eectiveness?

Very Effective most Laterals have been retained and contributed to business growth 28%

Moderately Effective Some retention or growth issues as well as some positives 61%

Neutral No positive or negative impact 4%

Negative Retention and/or growth issues with lack of results 6%

No opinion 1%


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16. Which o the ollowing areas would you say most closely describe your frms competitive advantage?

Choose the top 3.

17. Which roles are responsible or Business Development in your frm (Please check all that apply)

Partners 99%

Marketing 77%

Business Development 62%

Associates 47%

Other ("All staff; everyone") 4%

Value of service 44%

Quality of service performed 37%

Client focus / customer service 32%

Knowledge of clients business / client relationships 29%

Subject matter / industry expertise 28%

Firm culture 25%

Competitive rates 22%

Industry expertise/relationships 19%

Loyal client base 16%

Strong firm leadership 14%

Innovation 11%

Firm practice area coverage 10%

Firm geography 8%

Wide spectrum of industries served 4%

Other 1%


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18. Which best defnes the structure o marketing and business development roles in your frm?

Marketing and business development are one department 96%

Marketing and business development are two distinct departments 4%

19. Does your frm have a plan in place to build, track and measure client loyalty and satisaction?

Yes

No

Not sure

56%41%

3%

20. I your frm has a client loyalty and satisaction program, how oten do you measure it?

Annually 45%

Monthly 2%

After each matter closes 6%

Other 47%

21. Do you know who your frm considers its top fve (5) clients in terms o revenue?

Yes 100%


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22. Rate how well your frm leaders understand the business model / drivers o the business o your top 20

clients, including their business models, earnings, fnancial perormance, P&L, growth strategy,

executive leadership, board members:

Extremely knowledgeable on all 22%

Knowledgeable on some, not all 63%

Knowledge of a few 14%

Not Knowledgeable 1%

23. Which aspects o your frms relationship with clients would you most like to change in 2012? Please

rank all that apply in order o importance, with 1= Most Important.

The amount of work we get from key clients versus with other firms 37%

Improve profitability 32%

Improve client relationship management 28%

Better focus on profitable clients v. high-cost clients 26%

Institute better / new project management practices 24%

Provide higher service levels 21%

Differentiate work from competitors work 16%

Institute client satisfaction surveys / interviews 9%

Improve trust in the client/firm relationship 4%


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24. In which o the ollowing ways, i any, has your frm taken any steps in the past 12 months toward

managing proftability through cost-cutting or revenue growth as a response to the current economy?

Please tell us i each plan is part o a long term strategy, or a short term trend by dragging each

statement to its appropriate box.

Long Term Strategy Short Term Trend

Cross-selling 65% 8%

Investing in technology 56% 8%

Acquiring practice areas 44% 8%

Switching to less expensive vendors 14% 18%

De-equitization o partners 13% 15%

Beneft reductions 5% 3%

Reducing or eliminating summer associate program 4% 16%

Cuts in IT spend or internal spend 3% 6%

Pension cuts 3% 1%

Cuts on ace-to-ace business development activities, such as

entertaining clients or gol outings3% 6%

Layos 1% 11%

Bonus cuts or reezes 1% 11%

Cuts on business development networking activities, such as attending

conerences or holding client seminars1% 8%

Salary cuts or reezes 0% 9%

25. At what levels does your frm measure proftability? (Please Select all that apply)

By Client 81%

By Partner 65%

By Matter 61%

By Working Timekeeper 52%

By Billing Timekeeper 49%

By Originating Timekeeper 42%


*by practice group by frm by practice area and geographic ofce


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26. Does the frm have unproftable partners?

27. Are these unproftable partners at risk o de-equitization or removal?

Yes

No

Not sure

91%

5%4%

Yes, theyre on a performance plan

No

Not sure

70%

11%

18%

28. Has your law frm studied past expenses on matters in an eort to plan or similar engagements?

Yes, weve studied internally 86%

Yes, weve used a consultant to help us figure that out 1%

No 12%

Not sure 1%


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29. How oten in the lie cycle o a matter do you look at proftability? Choose any that apply.

Daily 0%

Weekly 5%

Monthly 42%

Annually 31%

At Completion 44%

Never 12%

30. What does your frm do with profts? Please check all that apply.

Percentage distributed to equity partnership 96%

Percentage to non-equity partners 55%

Percentage reinvested in firm 53%

Percentage to Associate Bonuses 46%

Percentage in escrow for future need 15%

Other 17%

31. How do alternative ee arrangements aect frm proftability? As compared to projects billed at an

hourly rate, are your frms non-hourly projects more or less proftable?

More profitable 12%

Less profitable 23%

Too soon to tell 56%

Dont know / Cant say 9%


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AppENDIX: DEmOgRaPhicS

1. Size o frm

101 to 250 attorneys 48%

251-500 attorneys 23%

501-750 attorneys 13%

751-1,000 attorneys 8%

More than 1,000 attorneys 9%

2. How long have you been at your frm?

Less than one year 1%

One to three years 16%

Four to five years 6%

Six to ten years 14%

More than ten years 62%

3. Your frm has ...

One office

Multiple offices

96%

4%


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Aout ALM Legal Intelligence

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